Limited partnerships are a type of business structure that is often overlooked when two or more partners consider how to set up their business or investment venture. In recent years, the limited partnership has taken a backseat to the often-preferred limited liability company, but it still offers some compelling benefits when instituted properly.
One of the most often-touted advantages of a limited partnership is the limit to how much an individual partner stands to lose should things go sideways with the venture. In general, a single investor or partner enjoys protection against losing any more than he or she puts into the partnership. This often proves exceptionally useful when it comes time to beat the pavement and rustle up investors, who tend to avoid opportunities that may cost more than they put in if the deal sours.
Similarly, limited partnerships also enjoy pass-through taxation, which allows individual partners to plan out their personal tax returns with more clarity than other forms of business taxation. In pass-through taxation, the individual partners simply report their respective earnings or losses from the venture, while the business itself does not bear taxation as an entity.
If you are considering a limited partnership, be sure to consult with an experienced attorney who understands the granular details of these issues. While it is useful to have a broad-strokes understanding of the advantages of limited partnerships, professional legal counsel helps you dig down into the specifics of your business and determine which form of business is truly a good fit for you and your partners.
Source: The Balance, "Reasons to Form a Limited Partnership," accessed Oct. 20, 2017